Canada's economy stalls in August; central bank's Q3 growth forecast in doubt
Recasts with context, details from release, comments
August GDP dented by weakness in goods-producing sector
July growth downwardly revised to 0.1% from 0.2%
Growth likely to hit 0.3% in September, Q3 seen up 1%
By Promit Mukherjee, Ismail Shakil
OTTAWA, Oct 31 (Reuters) -Canada's economy is likely to miss the Bank of Canada's revised third-quarter forecast after a slew of temporary factors stalled gross domestic product growth in August, data showed on Thursday, at a time when business output was already anemic.
Economic growth for July alsowas revised downwards to 0.1% from 0.2%, Statistics Canada said, and addedthat preliminary data showed growth is likely to have rebounded to 0.3% in September.
All this together translates to a 1.0% annualized growth in the third quarter, lower than the Canadian central bank'sestimate of 1.5%, a forecast that had alreadybeen revised down earlier this month.
Statscan's quarterly GDP figures are based on Canada's industrial output, while the third-quarter figure, which is dueto be released next month, will be based on a calculation of income and expenditure.
The flat GDP readingfor August matched the median forecast of analysts polled by Reuters.
Canada's economic growth has slowed under the weight of high borrowing costs, which have throttledbusiness investments and output and consumer demand.
Goods-producing industries contracted by 0.4% in August, reaching theirlowest level since December 2021, Statscan said, with the manufacturingsector declining by 1.2% and contributing the most to GDP for that month.
"Durable goods manufacturing continued the downward trend that began in the summer of 2023 and decreased 1.0% in August 2024," the agency said, adding that activity was at its lowest level since September 2021.
Temporary factors such as work stoppagesat Canada's two biggest rail companies and maintenance at car manufacturing factories added to the lackluster figure.
"These data support our call for another 50-bp (basis point) cut at the (Bank of Canada's) next meeting in an effort to try and accelerate growth and reduce slack in the economy," Andrew Grantham, senior economist at CIBC, wrote in a note.
Canada's central bankhas said it wants the economy to strengthen and has cut its key interestrate four times in a row to 3.75%to spur growth after inflation returned to its 1%-3% control range.
Money markets increased bets for another 50-basis-point rate cut inDecember to more than a 25% probability from roughly 18% beforethe release of the GDP data. <0#BOCWATCH>
The Canadian dollar CAD= edged up,with the loonie trading 0.06% higher at1.3893 to the U.S. dollar, or 71.98 U.S cents.
Bond yields for two-year Canadian government bonds CA2YT=RR fell 0.9 basis points to 3.169%.
The Bank of Canadawill have the chance to pore over another GDP report, inflation data for October and two job reportsbefore its next monetary policy decision announcement on Dec. 11.
Canada's GDP stalled in Aug, likely to rebound in Sept https://reut.rs/48qf5mt
Reporting by Ismail and Promit Mukherjee in Ottawa; Additional reporting by Dale Smith;
Editing by Jane Merriman and Paul Simao
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